IMF Urges 'More Forceful' Investment Effort from Berlin

Germany must take "more forceful" action to prepare its booming economy for the future by ramping up public investments, the International Monetary Fund said Monday, as calls mount for Berlin to reduce its oft-criticized trade surplus.

The plea comes after new German Finance Minister Olaf Scholz came under fire at home for presenting a budget this month that foresaw only modest spending increases until 2022, even as the country's infrastructure is crumbling and tensions with trade partners are mounting.

In its annual country report, the IMF said it welcomed some of the spending plans laid out by the new coalition government, including investments in high-speed internet and efforts to improve daycare options to get more women into the workforce.

"But further policy action is needed to more decisively boost domestic investment, which would also support external rebalancing," the IMF said.

Germany's massive trade surplus, which stood at some 245 billion euros ($294 billion) last year, has long caused friction with European peers and the United States, who complain it is costing growth and jobs in their own economies.

Institutions like the IMF regularly urge Europe's export powerhouse to do more to encourage consumption at home, indirectly boosting other nations by driving up imports.

U.S. President Donald Trump has been one of the loudest critics of the chronic imbalance, but French President Emmanuel Macron last week also urged Berlin to abandon its "perpetual fetish" for surpluses, "because they come at the expense of others."

They are unlikely to have been impressed by Scholz's first budget plans, unveiled at the start of the month, which will see public investments drop from 37.0 billion euros in 2018 to 33.5 billion in 2022 -- despite estimates of record tax revenues and federal budget surpluses.

"The current favorable economic environment provides an opportunity for the new government to take more forceful policy actions," the IMF said.

It warned Germany to respond to challenges looming on the horizon, including an aging population that will exacerbate the country's shortage in skilled workers, and rising protectionist threats that could undermine global growth.